By Mahmood Rafique
The assets of exchange traded funds (ETFs) and exchange traded products (ETPs) in the US broke through the $1 trillion milestone – reaching $1.027 trillion for the first time, according to BlackRock’s Global ETF Research and Implementation Strategy Team.
By mid of this month there were 894 ETFs with assets of $887.2 billion from 28 providers on two exchanges. At the end of December 2009 the US ETF industry had 772 ETFs, assets of $705.5 billion, from 29 providers on two exchanges. Year to date, 171 new ETFs have been launched in the US with another 828 new ETFs in the pipeline, while 49 ETFs were delisted.
There were 185 ETPs listed in the US with assets of $115.5 billion, from 20 providers on one exchange. At the end of December 2009, there were 142 ETPs with assets of $88.1 billion from 17 providers on one exchange.
ETFs are index based open-ended funds that can be bought and sold like ordinary shares on a stock exchange. They have become popular and widely used investment vehicles to facilitate many investment and diversification strategies — from short-term tactical applications to longer-term strategic applications. The ETP industry includes other product structures such as trusts, partnerships, commodity pools and notes.
“Growth in the US market for ETFs and ETPs reflects expansion in the use of the vehicle through retail channels, as well as their continuing popularity among institutional investors of all kinds,” said Deborah Fuhr, Global Head of ETF Research and Implementation Strategy at BlackRock.
“Increasingly both retail and institutional investors are building global, multi-asset portfolios that are designed to capture the performance of key ‘benchmarks’ for attractive market sectors — an application for which ETFs and ETPs are particularly well suited,” she said.
“ETF providers are expanding their product ranges into more specialized areas to cater to the growing number of professional and retail investors using ETFs as advanced portfolio construction tools,” she added.
“The increasing availability of these highly-specialized ETFs and ETPs across the full spectrum of equities, fixed-income and alternative investments means that investors can use these vehicles to instantly deploy capital to take advantage of new investment opportunities – with complete transparency into the underlying investments as well as low cost.
“Cost features make ETFs and ETPs among the most ‘democratic’ of investments, as a product’s pricing is consistent regardless of the type of investor or level of assets invested,” she said.
“Net new asset flows for U.S.-listed ETFs for 2010 to date provide evidence of growing interest in both developed and emerging markets equity ETFs/ETPs, with these flows greater this year than in 2009,” she said. Through November, net new flows into North American equity ETFs/ETPs have totaled $21 billion, compared with just $2 billion in 2009. Over the same time period this year, flows into emerging markets equity ETFs/ETPs overall have totaled $29 billion, compared with $27 billion last year. Of this total, flows into “multi-region” emerging markets products have totaled $26 billion year to date, compared with $16.7 billion last year.
Flows into fixed income products have totaled $31.2 billion, compared with $44.8 billion last year, and flows into commodity products have totaled $11.4 billion, compared with $32.6 billion last year.
Through November, the ETF average daily trading volume in US dollars has increased by 26 percent, to $57.7 billion. ETF trading volume in November accounted for 24.1% of all United States equity turnover.